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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (542)	4/29/2003 10:54:16 PM
From: Wyätt Gwyön	Respond to of 4912

read some of my earlier posts on this thread and the booms, busts thread.

To: GraceZ who wrote (542)	4/29/2003 11:33:43 PM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 4912

Hi Grace, Maybe you'd like to explain why someone who receives dollars as payment doesn't have the same options that you have with your dollars. Well, I'll try... <g> If I'm a private citizen of the USA, I don't really give a rat's behind what my spending does to the currency of another country, let alone the currency of the USA. I'm basically trying to purchase merchandise of satisfactory quality at the best possible price and/or service levels. If I'm a private citizen of another country, it's still the same scenario of best price/service or the biggest bang for my money. But, if I'm another country, and I'm holding huge amounts of foreign currency in my account(s) then it's a whole different story. If I exchange the foreign currency for my own currency (either an exchange of currency or an exchange of goods), then my own currency gains strength against the foreign currency providing I have purchased less than I have sold, as is the case with most trading partners of the USA. Since the Fed printing press is capable of printing as many dollars as is needed to provide liquidity for the dollar, it follows that the more dollars that are held in foreign government hands, the less valuable the dollar becomes when measured against any given foreign currency. If I (as a country) in essence strengthen my own currency relative to the US$, then the merchandise and services that my country exports to the USA become more expensive relative to the US$ (or any other country that uses the US$ as its currency). If the goods of my country are more expensive (relative to the US$), then it logically follows that my country will sell less of its goods (eventually) as the balance of trade must eventually even out. (If the balance of trade doesn't eventually even out, then the country with the "cheapened" currency will eventually become a perpetual debtor nation with little to no chance of ever repaying the foreign debt, and will eventually find itself in the position of being unable to service the foreign debt, which is the direction where the USA is rapidly headed at the moment.) So, if you're a foreign government, you really don't have the same choices as an individual citizen, unless you have predetermined that you really don't give a rat's behind about the strength of your currency vis a vis other currencies in the world. The choices are very limited. You can do US$ denominated exchanges with other countries (which may increase the value of your own currency). You can hold the US$ in abeyance (which means your holdings depreciate by the rate of inflation and you may be holding "dead money"). You can trade in US$'s with the USA, or invest those dollars in the USA. You can buy oil with the US$. Most countries buy oil and move the remainder back into US$ denominated equities and debt simply because those choices are the least evil of many evils. I'm sure that most countries (ideally) would rather do business on a gold exchange rate, especially if they are a creditor nation as opposed to a debtor nation. In my opinion, the day is rapidly approaching where the US consumer will no longer be able to support the global economy, at least not to the extent s/he does so now. When that day of reckoning arrives, there will be Hell to pay, financially speaking, because there's not a single trading country anywhere that's prepared for that happening. KJC